Phone-rate-hike decision could come Tuesday

TALLAHASSEE, Fla. -- Long distance and local telephone companies insisted Friday that consumers will benefit if regulators open up the local phone marketplace to competition.

Which consumers will get the benefit, when they will see it, and whether it will make up for higher local phone bills next year remained open to question.

The state's three biggest local phone companies, BellSouth, Sprint and Verizon, are asking the Public Service Commission to allow them to raise basic local residential rates by a record amount -- anywhere from $3.50 to $6.86-a-month on average depending on the company -- as part of a broad rate restructuring plan.

The PSC heard testimony on the issue Friday, wrapping up three days of hearings that could result in a decision as early as Tuesday.

Phone companies say the plan would bring a host of advantages to consumers. By allowing higher local rates, a number of companies would be interested in getting into the local phone market, ultimately bringing rates back down. With rates where they are now, it's too expensive to provide local service, the companies say.

But consumer advocates, including state Attorney General Charlie Crist, the massive senior citizens' lobby AARP and the Legislature's phone and utility consumer watchdog oppose the change, saying there's no guaranteed benefit for millions of Floridians who will see higher local phone rates.

The Legislature passed and Gov. Jeb Bush signed a bill earlier this year revamping the state's phone rate law, allowing companies to seek the higher rates in an effort to bolster competition. The argument, in part, is that a competitive marketplace has other benefits besides lower prices. It breeds technological innovation and choices for consumers. Phone companies cite the way competition in long distance and cell phone service has created lower rates and efforts to make service better.

The restructuring would also require the local companies to eliminate a fee they currently charge to long distance companies for connecting calls -- a fee local companies say makes up for the money they lose providing local service.

The long distance companies are supposed to pass on that savings to customers, offsetting at least some of the local rate hike.

Consumer advocates tried on Friday to question long distance companies about exactly which customers would see that savings -- how much would go to residential customers and how much to businesses.

But the long distance companies refuse to publicly say, contending such information is confidential for competitive reasons.

The numbers have been provided to the PSC.

Mike Twomey, the lawyer representing AARP, asked if "theoretically, couldn't 99 percent of the reduction be given to business customers?"

"Theoretically, it could happen, but in reality it would not," said Richard Guepe, an executive with long distance provider AT&T. He said competition for residential customers would prevent it. Still, Guepe would only publicly guarantee that the percentage of the savings for residential customers would be "greater than one percent."

The secrecy of the numbers makes it hard for the public to determine whether the plan is fair, consumer advocates argue.

"How can you have a rate case where you're not allowed to talk about the rates?" asked Mark Cooper, a phone consumer advocate scheduled to testify for AARP against the local rate increase. "They'll tell me how much the rates are going up. They won't tell me how much other rates are coming down."

Obvious concern by some commissioners over how much residential local service will go up led BellSouth to offer Friday to increase the number of people who would be protected from any increase under its plan.

Under its original proposal, BellSouth said customers with incomes up to 125 percent of the poverty line -- which is $18,400 for a family of four -- would be protected from any rate increase for four years.

BellSouth now says it would protect all customers that fall within 135 percent of the poverty line.

Phone company executives say "benefits" for consumers don't necessarily have to be dollar-for-dollar reductions in some rates to make up for increases in others.

A benefit might be choice in the types of services that are provided -- such as bundling of cell phone, local home phone and even Internet service -- the companies say.

"Not every customer will necessarily experience a reduction in his long distance bill," acknowledged Dirk Henson, an executive with BellSouth's long distance company. Such new services could be the benefit.

Commissioners must decide how that fits with the new law that requires that residential customers get some sort of benefit.

Closing arguments by supporters and opponents of the rate increase were scheduled for later Friday night. Commission Chairwoman Lila Jaber said the panel wouldn't make a decision before Monday at the earliest.

Proposed rate increases for three local phone companies

BellSouth, Sprint and Verizon want to increase average monthly bills for basic residential phone service during the next four years.

Sprint, which serves parts of the Orlando and Tallahassee areas, a large swath of southwest Florida and some areas in the Panhandle, wants to increase residential rates by $2.95 in early 2004, $2.75 in 2005 and $1.16 in 2006.

BellSouth, which has customers up and down most of the east coast of Florida, proposes to increase basic residential service rates by $1.25 a month in 2004 and an estimated $1.00 to $1.25 per month in 2005 and 2006.

Verizon proposes to increase basic local bills by $1.58 in each of the next two years and by $1.57 in 2006.

BellSouth, Sprint and Verizon want to increase average monthly bills for basic residential phone service during the next four years.

Sprint, which serves parts of the Orlando and Tallahassee areas, a large swath of southwest Florida and some areas in the Panhandle, wants to increase residential rates by $2.95 in early 2004, $2.75 in 2005 and $1.16 in 2006.

BellSouth, which has customers up and down most of the east coast of Florida, proposes to increase basic residential service rates by $1.25 a month in 2004 and an estimated $1.00 to $1.25 per month in 2005 and 2006.

Verizon proposes to increase basic local bills by $1.58 in each of the next two years and by $1.57 in 2006.